NDIC Says Deposit Insurance Coverage Limit Subject To Review

Just in: 99.4 % of bank accounts contain less than N500,000-NDIC - Vanguard News

..Defends Current Threshold

Yemisi Izuora

The Nigeria Deposit Insurance Corporation, NDIC, has again provided a more robust explanation with regard to seeming lack of understanding of its policy on deposit insurance coverage limits.

The Corporation is seeking full understanding of its policy on the issue and also reminding the public that it has carried out periodic upward review of the threshold.

According to the Managing Director and Chief Executive Officer, of the agency Bello Hassan, the coverage limits are not designed to be static but subject periodic reviews to ensure that they are consistent with the public policy objectives of the Deposit Insurance System.

Speaking during the opening ceremony of the 18th edition of media conference for Business Editors and Finance Correspondents Association of Nigeria, FICAN in Gombe, today, Hassan defended the N500,000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor per microfinance bank insurance limit as the most adequate and robust in the world.

He said the issue is so fundamental and needs to be thoroughly interrogated in the interest of all depositors to in order to sustain the Corporation’s rich legacies and the multiple ingenuous operational landmarks it was able to achieve in its over three decades of existence despite daunting challenges.

He recalled that the issue also provoked strong reactions during some of the presentations at the similar workshop held in Ibadan for the media.

“Much of the concerns are predicated on the lack of adequate understanding of the principles, rationale and realities that informed the determination of our coverage limits. It is in that respect that we urge the media through this forum to make Nigerian depositors aware that the NDIC’s maximum coverage limits of N500,000.00 per depositor per commercial, merchant and, non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor per microfinance bank remain the most adequate and robust in the world.” Hassan explained.

He said that participant at the Ibadan workshop had been very critical that the coverage limits are not only small but required an urgent upward review in order to engender stronger public confidence in the banking system.

The CEO, however, argued that, as it is today, these limits are not only adequate but consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits.

In his words, “The IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors while the rest remain exposed to ensure market discipline. Deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective.

“In addition, the coverage limits are not designed to be static but subject periodic reviews to ensure that they are consistent with the public policy objectives of the Deposit Insurance System. The Corporation successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.

“In the same vein, the Corporation invites you to note that in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively. Out of these numbers, the N500,000 coverage limit fully covered 99.4%; 97.6%; 97.5% and 97.6% of accounts, respectively. What these figures entail is that only less than 3% of accounts/depositors are not fully covered by the prevailing coverage limits. The implication of this is that in the event of failure of a bank, above 97% of depositors would be fully covered by the Corporation.”

He observed that the Corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in our banking system.

Hassan stressed the need for the media to do more in assisting the Corporation in sensitizing stakeholders with a view to correcting the misconception around the NDIC coverage limits.

“In all of this, the media, the civil society groups, along with the insured financial institutions that are represented at this workshop will remain the most strategic and critical stakeholders that we cherish the most. Through the better understanding of our programmes and policies, it is hoped that you will not only be better informed in the coverage of our activities, but also be well-equipped to contribute to our advocacy and mobilization for a better financial system. ” he said.

“I therefore call on you to continue to support the Corporation in its resolve to fully deliver on its core mandates. On our part, we promise to keep our doors open to your suggestions and observations, while partnering with you on capacity building and other areas of mutual benefit.” he appealed.

Oriental News Nigeria, reports that the theme of this year’s workshop is: “Enduring Extreme Disruptions: Resilience & Reinvention for Banking System Stability & Deposit Insurance” .

Hassan noted that as economies across the globe continue to grapple with the devastating impact of the COVID-19 Pandemic, it has become expedient and highly desirable, for supervisors to come up with appropriate strategies that are required to build resilience into our financial system as we seek to provide the much-needed support to the Federal Government’s economic recovery agenda.

The workshop theme, as well as the papers to be deliberated upon along with the quality of the resource persons, were carefully selected to achieve the same objective, he added.

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